Internet Value-Added Services:
Challenges and Recommendations For China's Telecom Operators
October 9, 2008
CCID Consulting's data shows revenues from China's Internet
industry reached 116.32 billion Yuan in 2007, growing over 30%. According to
the CNNIC (China Internet Network Information Center), China's Internet
subscribers reached 253 million at the end of June 2008, making China the
largest Internet subscriber base in the world.
However, for China's telecom operators, their success in
value-added Internet services has been lackluster at best. Telecom operators
have been watching Internet developments closely. In May 2005, China Telecom
launched V-Net in Guangdong, a first attempt at Internet value-added
application service. However, available free service offerings have limited
V-Net's success. Free video websites, for example, offers readily available
sharing and low copyright risks.
In short, fixed-line telecom operators are unable to
control and capitalize the user in the open Internet value chain where there
are many players. These players can develop Internet services that establish
close relationships with users, bypassing the telecom operators as ISPs. In
Alibaba, for example, have dominated
Internet service areas such as in portal websites, instant messaging, search
engines, online gaming, and e-commerce, respectively.
After the telecom restructuring earlier in 2008, new
opportunities will arise for China's transformed telecom operators, and the
key opportunity will be enabling these operators to improve user loyalty in
new ways. Telecom operators will be able to own 3G, full service operating
licenses. CCID Consulting recommends the following to operators:
Leverage existing strengths to provide services around
As convergence of IT and telecom enters mobile
communications, telecom operators will have a new chance to offer Internet
value-added services. Mobile Internet should be the core of all telecom
operator services and Internet services will be a most important growth
point. Telecom operators will have more control by virtue of its position in
mobile phone service, and operators can leverage its existing advantages in
user number, capital, and brand.
Offer fast, broadband services.
Broadband adoption in China is still relatively low. This
provides another window of opportunity for telecom operators, which can be
one of many value-added Internet services to offer. Because of low adoption
rates, broadband also offers large growth opportunities as well.
Don't compete with entrenched players; look for new,
specific areas of value-add.
Competing with Tencent in instant messaging, or Sina in
portals, would simply not make sense. Instead, telecom operators should take
their existing strengths and partner strategically with other IT vendors to
serve unmet needs to achieve win/win results:
- Family oriented content, such as education and health
care. Telecom operators can provide customized services in cooperation
with local schools, hospitals, and other public resources, thereby
attracting household users.
- Local websites. By virtue of its branch presence across
China, telecom operators can provide local websites and local content that
pinpoint the informational needs of a given locale.
- Secure Internet surfing environment. Provide a trusted
environment that includes built-in, online set of tools such as
anti-virus, which users can go on the Internet with confidence.
- Vertical industry search and e-commerce. Provide such
services in industries not yet addressed, and incorporate seamless billing
functions which telecom operators already have.
- Specific segment of user. Provide a set of services
targeted to a specific, unmet user segment, such as China's senior
For more information
contact us for these and
other China-related data, information and products.
Unless otherwise specified,
all information provided is sourced from CCID Consulting.